Can you choose an arbitrator on the grounds of his religion?

5 August 2011 by David Hart KC

Jivraj v. Hashwani [2011] UKSC 40 Read judgment

We all know that these days you cannot just say you want to employ a Muslim or a Catholic without a good reason. But what about the potentially different question as to whether you can choose your own private judge, namely an arbitrator, by reference to his or her religion?

This problem faced the Supreme Court recently. Its answer involved a detailed analysis of what was involved in the whole process of arbitration, and the similarities and difference between it and a more typical relationship between client and professionals. The Court also touches on the exception to the rule against discrimination, based upon the job having a genuine occupational requirement for a person of a given religion.

Mr Jivraj and Mr Hashwani entered into a worldwide property joint venture agreement under which they agreed that disputes should be determined by arbitration, applying English Law, and  before three arbitrators, each of whom should be a respected member of the Ismaili community. The Ismaili community comprises Shia Imami Ismaili Muslims, and it is led by the Aga Khan, whose title is the hereditary title of the Imam of the Ismaili community.

The businessmen then tried to go their separate ways, and in the course of various proceedings which followed,  Mr Hashwani argued that the term requiring the arbitrators to be Ismailis was unlawful, and hence that unlawfulness meant that the arbitration clause was not binding on him.

The Supreme Court rejected the unlawfulness argument, reversing a strong Court of Appeal, and upholding the judge. On what basis did they do so?

The unlawfulness was said to arise under the Employment Equality (Religion or Belief) Regulations 2003 on the ground that it constituted an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services. Reg. 2 defined “employment” as meaning  “employment under a contract of service or of apprenticeship or a contract personally to do any work.” The Regulations have been repealed, but their gist is now to be found in the Equality Act 2010. Their content was drawn from an EC Framework Directive 2000/78/EC made for the purpose of establishing:

“a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.”

So the principal question for decision was whether the relationship between the parties and an arbitrator fell in to this category. A subsidiary question arose as to whether, assuming it did, the clause was still lawful because of reg. 7(3), applicable where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment,  being of a particular religion or belief is a genuine occupational requirement for the job, and it was proportionate to apply that requirement in the particular case.

One can quite see why the courts differed on the principal point. On one level, an arbitrator is engaged by the parties to determine disputes as directed by the parties; as the CA put it

“The paradigm case of appointing an arbitrator involves obtaining the services of a particular person to determine a dispute in accordance with the agreement between the parties and the rules of law, including those to be found in the legislation governing arbitration. In that respect it is no different from instructing a solicitor to deal with a particular piece of legal business, such as drafting a will, or consulting a doctor about a particular ailment or an accountant about a tax return. Since an arbitrator (or any professional person) contracts to do work personally, the provision of his services falls within the definition of ’employment’, and it follows that his appointor must be an employer within the meaning of regulation 6(1)…”

The SC attached greater importance to other facets of the arbitrator’s role and status. The nub of Lord Clarke’s judgment (with whom 3 justices agreed) is:

Although an arbitrator may be providing services for the purposes of VAT and he of course receives fees for his work, and although he renders personal services which he cannot delegate, he does not perform those services or earn his fees for and under the direction of the parties…. He is rather in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services…

The arbitrator is in critical respects independent of the parties. His functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party. As the International Chamber of Commerce (“the ICC”) puts it, he must determine how to resolve their competing interests. He is in no sense in a position of subordination to the parties; rather the contrary. He is in effect a “quasi-judicial adjudicator”.

In particular, arbitrators have complete power over all procedural and evidential matters, including how far the proceedings should be oral or in writing, whether or not to apply the strict rules of evidence, whether the proceedings should be wholly or partly adversarial or whether and to what extent they should make their own inquiries. They are the sole judges of the evidence, including the assessment of the probabilities and resolving issues of credibility.

Herein lies a further twist. All of the above can be said about judges, and yet judges are undoubtedly employed by the state. The SC thought that this did not assist, because arbitrators are appointed by the parties, and the relationship between judges and the state cannot bear on that appointment. But what it does show is that arbitrator’s independence (just as judicial independence) cannot be determinative of the nature of the underlying relationship.

In a short concurring judgment, Lord Mance cited with agreement a leading arbitration textbook on the status of an arbitrator:

Equally, regarding the arbitrator as a service provider, like an accountant, investment banker, lawyer, or other professional, ignores the essential adjudicative character of his or her mandate. Arbitrators do not merely provide the parties with a service, but also serve a public, adjudicatory function that cannot be entirely equated with the provision of service in a commercial relationship. The proper analysis is therefore to regard the arbitrator’s contract as a sui generis agreement specifying the terms on which this adjudicative function is to be exercised vis-à-vis particular parties and on particular terms.”

And therein lies the difficulty of the case. Much of an arbitrator’s role is just like that of another professional. But it is the extra independent adjudicatory function which in the SC’s view made the relationship as a whole not a “contract personally to do any work” under the Regs.

The majority of the SC also agreed that, even if arbitrators were caught by the Regs, there was a general occupational requirement under Reg.7(3) for the choice of an Ismaeli arbitrator by two disputing Ismailis, given their shared religious ethos. It attached importance to the fact that one of the more significant and characteristic spirits of the Ismaili sect was an enthusiasm for dispute resolution contained within the Ismaili community.

Lord Mance was less convinced. Assuming a case within the Regs:

say the engagement by the Ismaili community, or by any other organisation whose ethos is based on religion or belief, of an employed lawyer to undertake English law work, I would expect it to be much more difficult to maintain as valid a restriction to members of the Ismaili community or of the other religious or faith-based organisation.

Having pointed out the now widespread familiarity, both in England and Europe, with amicable resolution of disputes, including conciliation, mediation and arbitration, he added

A religious or faith-based community’s or organisation’s power first to select and then to direct its own employed lawyers would be a secure means of ensuring that its employed lawyers valued, understood and prioritised the handling of English law work so far as possible on a non-confrontational basis, using alternative dispute resolution procedures wherever possible. A refusal to employ anyone other than a member of the particular religion or faith would in that context seem unlikely to be justified or proportionate.

So a bit of a warning shot about claiming that a particular organisation or faith has a specific monopoly on ADR skills.

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Related posts:

• Religious freedom doesn’t stop at the prison gates
• Religious freedom doesn’t stop at the prison gates: Part 2
• A leap of faith?